¡¡¡¡¡¡¡¡¡¡¡¡Economic Research Journal (Monthly) Vol.42 No.9 September, 2007

¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡
¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡¡ CONTENTS

Excess Liquidity and Policy Implications

ª«¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªTang Shuangningª« (ª©4ªª)

Marx's Model of Economic Growth Theory

ª«¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªWu Yifengª« (ª©11ªª)

Local Officials and Economic Growthª«

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªXu Xianxiang, Wang Xianbin and Shu Yuanª« (ª©18ªª)

An Analysis of Coexistence of the External

Appreciation and the Domestic Inflation of RMBª«

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªBei Duoguang and Zhu Xiaoliª« (ª©32ªª)

Study on China's Participation of International Service Outsourcing

ª«¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªLu Fangª« (ª©49ªª)

Determinants of Exports in Chinese Electronics Industry

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªª«Zhong Changbiaoª« (ª©62ªª)

The Measurement of Regional Specialization

ª«¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªFan Fuzhuoª« (ª©71ªª)

The Estimation of Human Capital in Chinese Citiesª«

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªZhu Ping fang and Xu Defangª« (ª©84ªª)

Trends and Patterns of Urban Poverty in China: 1988¡ª2002

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªXia Qingjie, Song Li'na and Simon Appletonª« (ª©96ªª)

R&D Risk, Innovation Environment and the Optimal Life of Software Patent

ª«¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªDong Xuebing and Wang Zhengª« (ª©112ªª)

Governance Environments and Consideration in Share Reform:

An Investor Protection Perspective

ª«¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªXin Yu and Xu Lipingª« (ª©121ªª)

Ownership Structure and Financial Restatements: Evidence from Chinaª«

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªYu Pengª« (ª©134ªª)

Momentum and Reversal in China Stock Marketª«

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªLu Zhen and Zou Hengfuª« (ª©145ªª)

A Summary of the Forum on China's Economic Growth and Business Cyclesª«

¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ª¡ªForum Secretariatª« (ª©156ªª)

Excess Liquidity and Policy implications

Tang Shuangning

(China Ever bright Group)

Abstract: Upon clarifying the concept of liquidity, the paper analyzes the implications of the global excess liquidity for China and the structural features of China's excess liquidity. It proposes to reduce the excess liquidity in China based on the market mechanism coupled with government induction  Currently the emphases should be placed on the reduction of current account surpluses and on the mitigation of the shortage of financial resources in the rural area of China.

Key Words: Excess Liquidity; Current Account Surpluses; Monetary Policy

JEL Classification:  G150, G180

Marx's Model of Economic Growth Theory

Wu Yifeng

(School of Economics, Rennin University of China)

Abstract: With more than twenty years of scientific cultivation, Marx pioneered into a new field later to be regarded as economic growth theory. In the history of economic growth theory it was Marx who first theoretically established the initial economic growth model in which dynamic and longª²run analyses more than static and shortª²run ones had been schemed. Feldman, a Marxist, formulated in mathematic terms the first model of economic growth based on Marx's economic growth theory. Now days it is still of significant importance for us to research on Marx's economic growth model and the succeeding models by Marxian economists. To promote and develop Marxian economic growth theory we should start from practice and make use of reasonable factors of all kinds of economic growth models in Western Economics.

Key Words: Marx; Fle'dman; Economic Growth Theory; Economic Growth Model

JEL Classification: B140, B240

Local Officials and Economic Growth

Xu Xianxiang, Wang Xianbin and Shu Yuan

(Lingnan College, Sun Yatª²sen University)

Abstract: It's the repeatedly observed phenomenon that the local officials play an active role in the process of economic development in China. The literature, however, has been in dark, because it's not easy to separate the impact of local officials on economic growth from the fixed effect. We find the official transfer can serve as the natural experiment to solve the problem of the separation. So we construct the governorª²province matched data set in which people can trace back at least two provinces the same governor served in, and then systematically explore the direct effect of governor on the provincial economic growth, which we call the effect of governor transfer. The governor does matter for provincial economic growth. Specifically, it's about 1 percentage of economic growth that can directly and significantly attribute to the incumbent governors, which to our knowledge is the first attempt to understand the economic growth rigorously at the individual level.

Key Words: Local Official; Effect of Governor Transfer; Economic Growth

JEL Classification:P160£¬O110

An Analysis of Coexistence of the External Appreciation

 and the Domestic Inflation of RMB

Bei Duoguang and Zhu Xiaoli

(Renmin University of China)

Abstract: Since 2002, Renminbi has shown a phenomenon that has been the coexistence of the external appreciation and the domestic inflation. This new monetary phenomenon, which we call, has been strengthened in the context that US dollar depreciates internationally and that domestic economy is overwhelmed with excessive liquidities. Certainly the monetary phenomenon is the reflection of the real economy: that continuing trade surplus, triggered robustly by the export-driven economy, is bringing a huge amount of exchange reserve which accelerates sequentially the expansion of domestic money supply. Furthermore, a refrained appreciation of RMB tends to deteriorate the domestic inflation, which is not simply a traditional concept of CPI but a broad inflation parameter including a variety of asset prices. It's sure that the new phenomenon is becoming a new challenge to the macroeconomic equilibrium as well as the decision maker of monetary policy.

Key Words: RMB Appreciation; Inflation; Asset Price Inflation; Inflation Index

JEL Classification:G150£¬G180

Study on China's Participation of International Service Outsourcing

Lu Feng

(China Center for Economic Research at Peking University)

Abstract: The tremendous growth of service outsourcing witnessed over the last 2 decades or so has resulted in a new wave of economic globalization with important implications for the developing countries. This paper observes how the issue of international service outsourcing perceived in China since the early 1990s, examines the status quo with respect to China's participation of international service outsourcing and rooting causes for the relative backwardness of China's performance in this area. It also discusses the policy adjustments necessary for deepening China's involvement in the service globalization.

Key Words: Service Outsourcing£» Economic Globalization£» Development Policy

JEL Classification: F15, L23, O38

Determinants of Exports in Chinese Electronics Industry

Zhong Changbiao

(Business School of Ningbo University)

Abstract: Employing a panel data set for 1999¡ª2002, this paper examines the determinants of exports in Chinese electronics industry, with a particular focus on the role of foreign direct investment (FDI). We find that FDI especially investments from Hong Kong, Macau and Taiwan and economies of scale are positively related to exports. We also find that the share of state capital is negatively associated with exports, whereas capital intensity, R&D and human capital are not important, indicating that most Chinese electronics enterprises are still positioned at the lowª²end of product value chain in the international division of labor The paper makes two original contributions. The first is the distinction of contribution made by FDI from different country groups and the establishment of evidence that FDI from Hong Kong, Macao and Taiwan plays a greater role in promoting exports than FDI from western countries. The second is the finding that the level of  labour cost moderates the relationship between FDI and exports. These findings carry important policy implications.

Key Words: Exports; FDI; Electronics Industry

JEL Classification: F230

The Measurement of Regional Specialization

Fan Fuzhuo

(Institute of Sector Economy, Shanghai Academy of Social Sciences)

Abstract: Under suppositions of sealed economy and the same demand structures between areas, we constitute the regional specialization coefficient, an index to measure regional specialization. It is a more generalized index as industrial structure variance coefficient, spatial distribution variance coefficient, absolute deviation and Krug man's index are all its special forms. When discussing regional specialization, we cannot ignore the relative area scale factor (or the relative industry scale factor) or we might draw mistaken judgment, not to say errors in logical reasoning. We find that the level of regional specialization in China's industry ascends much since midª²late 1980s. And we also find that if we neglect the relative area scale factor (or the relative industry scale factor), we would overestimate regional specialization level in China's industry.

Key Words: Regional Specialization; Regional Specialization Coefficient; Industrial Structure Variance Coefficient; Spatial Distribution Variance Coefficient

JEL Classification:R110£¬R190

The Estimation of Human Capital in Chinese Cities

Zhu Pingfang and Xu Dafeng(Research Institute of Economics, Research Center of Econometrics, Shanghai Academy of Social Science; Business School, East China University of Political Science and Law)

Abstract: According to the estimation of human capital, there are indeed some methods. However, those methods can't be directly used to the study on Chinese cities. The main difficulty is that we have no sufficient data. In this paper we develop a new framework, which is feasible, to estimate the human capital in Chinese cities. Our estimation shows that human capital in different cities in China is different. There are some disparities of the human capital in Chinese cities. We also make some explanations about this result.

Key Words: Physical Capital; Human Capital; Wage

JEL Classification: E220

Trends and Patterns of Urban Poverty in China: 1988¡ª2002

Xia Qingjie, Song Li'na and Simon Appleton

(School of Economics, Peking University; School of Sociology and Social Policy, University of Nottingham; School of Economics, University of Nottingham)

Abstract: This paper estimates trends and patterns in absolute poverty in urban China from 1988 to 2002 using the Chinese Household Income Project (CHIP) surveys. Poverty incidence curves are plotted, showing that poverty has fallen markedly during the period regardless of the exact location of the poverty line. Income inequality rose from 1988 to 1995 but has been fairly constant thereafter. Models of determination of income and poverty reveal widening differentials by education, sex and party membership. Income from government antiª²poverty programs has little impact on poverty, which has fallen almost entirely due to overall economic growth rather than redistribution.

Key Words: Poverty; Inequality; Economic Growth; Welfare; Public Policy

JEL Classification: O15, J38; O38

R&D Risk, Innovation Environment and the Optimal Life of Software Patent

Dong Xuebing and Wang Zheng

(College of Economics, Zhejiang University)

Abstract: Following Gilbert and Shapiro (1990), this paper employs the model of discounted social welfare to study the optimal patent life of software with two new variables: probability of successful innovation and innovation efficiency. We find that given the rate of return, the effect of given patent life would be different for the different industry with different investment risk and probability of successful innovation. When the innovation efficiency increases, the optimal patent life would first increase to its maximum, and then decrease. Therefore it is necessary to set industryª²specific patent lives, implementing different patent protections according to the basic characteristics of the industry, especially the value of innovation efficiency. Finally, some issues related to policy application are tackled on at the end of the paper.

Key Words: Software Patent£» Optimal Patent Life£»Probability of Successful Innovation£»Innovation Efficiency

JEL Classification:D430£¬L130£¬L520

Governance Environments and Consideration in Share Reform: An Investor Protection Perspective

Xin Yu and Xu Liping

(School of Business, Sun Yatª²sen University)

Abstract: Using marginalization index and government effectiveness index, this paper investigates the role of corporate governance environments in determining the consideration/payment by untreatable shareholders to tradable shareholders in share reform during 2005¡ª2007. We find that, the better the corporate governance environments, the lower the consideration. We also find that there is a negative correlation between institutional ownership and consideration, and this negative correlation is obviously lower for listed companies located in good governance environment districts than in poor governance environment districts. In conclusion, better corporate governance environment leads to lower cost in share reform due to the existence of ¡®governance premium'. Better corporate governance environment can also reduce the agency problems arising from the conspiracy of untreatable shareholders and institutional shareholders in share reform, therefore provide better protection to minor investors.

Key Words: Share Reform; Corporate Governance Environments; Investor Protection

JEL Classification: G320, G380

Ownership Structure and Financial Restatements: Evidence from China

Yu Peng

(School of Accounting, Zhongnan University of Economics and Law)

Abstract£ºOwnership structure is a determinant of efficiency of corporate governance. This paper examines the efficiency of ownership structure through financial restatements in two dimensions of control right and ultimate shareholders. I find that, when a company is absolute controlled, its probability of restatements occurrence decreases. I also find that when a company is absolute controlled by non state shareholders, its probability of restatements occurrence is lower than a company controlled by state shareholders. The result indicates that decentralized ownership and state ownership has less efficiency in monitoring managers, so the insiders have more opportunities to manipulate earnings. This study extends research in corporate governance, and provides evidence to supervisors and investors in decisionª²making.

Key Words£º Corporate Governance; Ownership Structure; Earnings Manipulation; Financial Restatements

JEL Classification£ºG320, M410

Momentum and Reversal in China Stock Market

Lu Zhen and Zou Hengfu

(Institute for Advanced Study, Wuhan University)

Abstract£ºThis paper generalizes the Hong, Stein (1999) model to investigate the momentum and reversal in China Stock Market that is a policy market. The main results are: The reversal effect is more significant than the momentum effect in China Stock Market; there exist a ultraª²shortª²term momentum and a shortª²term reversal besides the intermediateª²term momentum and the longª²term reversal; and the reversal effect in smallª²size firm stocks is more significant than the reverse effect in largeª²size firm stocks, the reversal effect in highª²tradingª²volume firm stocks is more significant than the reversal effect in lowª²tradingª²volume firm stocks. At last, we find some empirical evidence to support this analysis in China Stock Market.

Key Words£º Momentum; Reversal; Policy Market; Bounded Rationality

JEL Classification£ºG120, G140